LRN
$41.37
Stride
($.43)
(1.03%)
Earnings Details
2nd Quarter December 2022
Tuesday, January 24, 2023 4:30:00 PM
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Summary

Stride Beats

Stride (LRN) reported 2nd Quarter December 2022 earnings of $1.19 per share on revenue of $458.4 million. The consensus earnings estimate was $1.07 per share on revenue of $442.4 million. The Earnings Whisper number was $1.10 per share. Revenue grew 11.9% on a year-over-year basis.

The company said it expects third quarter revenue of $445.0 million to $465.0 million and now expects fiscal 2023 revenue of $1.775 billion to $1.815 billion. The company's previous guidance was 2022 revenue of $1.71 billion to $1.79 billion. The current consensus revenue estimate is $436.30 million for the quarter ending March 31, 2023 and revenue of $1.74 billion for the year ending June 30, 2023.

K12 Inc is a technology-based education company. It offers proprietary curriculum and educational services created for online delivery to students in kindergarten through 12th grade, or K-12.

Results
Reported Earnings
$1.19
Earnings Whisper
$1.10
Consensus Estimate
$1.07
Reported Revenue
$458.4 Mil
Revenue Estimate
$442.4 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Stride Achieves Record Enrollment Growth over First Quarter

Ends Quarter with over 180 Thousand Enrollments

RESTON, Va.--(BUSINESS WIRE)--Stride, Inc. (NYSE: LRN), one of the nation’s leading technology-based education companies, today announced its results for the second fiscal quarter ended December 31, 2022.

Second Quarter Fiscal 2023 Highlights Compared to 2022

  • Revenue of $458.4 million, compared with $409.5 million, driven by enrollment strength, increases in revenue per enrollment, and Adult Learning growth.
  • Income from operations of $68.1 million, compared with $56.9 million.
  • Net income of $50.7 million, compared with $42.0 million.
  • Diluted net income per share of $1.19, compared with $1.00.
  • Adjusted operating income of $76.3 million, compared with $60.7 million. (1)
  • Adjusted EBITDA of $100.5 million, compared with $82.7 million. (1)

Second Quarter Fiscal 2023 Summary Financial Metrics

Three Months Ended December 31,

Change 2022/2021

2022

2021

$

%

(In thousands, except percentages and per share data)
Revenues$

458,435

$

409,507

$

48,928

11.9

%

 
Income from operations

68,073

56,915

11,158

19.6

%

Adjusted operating income (1)

76,293

60,731

15,562

25.6

%

 
Net income

50,705

42,004

8,701

20.7

%

Net income per share, diluted

1.19

1.00

0.19

19.0

%

 
EBITDA (1)

95,536

82,095

13,441

16.4

%

Adjusted EBITDA (1)

100,477

82,697

17,780

21.5

%

(1)

To supplement our financial statements presented in accordance with U.S. generally accepted accounting principles (GAAP), we also present non-GAAP financial measures including adjusted operating income (loss), EBITDA and adjusted EBITDA. Management believes that these additional metrics provide useful information to investors relating to our financial performance. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is provided below.

Six Month Fiscal 2023 Highlights Compared to 2022

  • Revenue of $883.6 million, compared with $809.7 million.
  • Income from operations of $39.4 million, compared with $49.9 million.
  • Net income of $28.0 million, compared with $36.1 million.
  • Diluted net income per share of $0.66, compared with $0.85.
  • Adjusted operating income of $56.4 million, compared with $65.3 million. (1)
  • Adjusted EBITDA of $103.5 million, compared with $108.2 million. (1)

Six Month Fiscal 2023 Summary Financial Metrics

Six Months Ended December 31,

Change 2022/2021

2022

2021

$

%

(In thousands, except percentages and per share data)

Revenues$

883,585

809,733

73,852

 

9.1

%

 
Income from operations

39,354

49,938

(10,584

)

-21.2

%

Adjusted operating income (1)

56,373

65,253

(8,880

)

-13.6

%

 
Net income

28,033

36,121

(8,088

)

-22.4

%

Net income per share, diluted

0.66

0.85

(0.19

)

-22.4

%

 
EBITDA (1)

93,068

99,265

(6,197

)

-6.2

%

Adjusted EBITDA (1)

103,519

108,153

(4,634

)

-4.3

%

 

(1)

To supplement our financial statements presented in accordance with U.S. generally accepted accounting principles (GAAP), we also present non-GAAP financial measures including adjusted operating income (loss), EBITDA and adjusted EBITDA. Management believes that these additional metrics provide useful information to investors relating to our financial performance. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is provided below.

Revenue and Enrollment Data

Revenue

The following table sets forth the Company’s revenues for the periods indicated:

Three Months Ended

 

 

 

 

 

 

Six Months Ended

 

 

 

 

 

December 31,

 

Change 2022 / 2021

 

December 31,

 

Change 2022 / 2021

2022

 

2021

 

$

 

%

 

2022

 

2021

 

$

 

%

(In thousands, except percentages)
 
General Education$

274,764

$

313,241

$

(38,477

)

(12.3

%)

$

546,422

$

619,582

$

(73,160

)

(11.8

%)

Career Learning
Middle - High School

153,795

75,287

78,508

 

104.3

%

279,330

146,699

132,631

 

90.4

%

Adult

29,876

20,979

8,897

 

42.4

%

57,833

43,452

14,381

 

33.1

%

Total Career Learning

183,671

96,266

87,405

 

90.8

%

337,163

190,151

147,012

 

77.3

%

Total Revenues$

458,435

$

409,507

$

48,928

 

11.9

%

$

883,585

$

809,733

$

73,852

 

9.1

%

Enrollment Data1

The following table sets forth enrollment data for students in our General Education and Career Learning lines of revenue. Enrollments for General Education and Career Learning only include those students in full service public or private programs where Stride provides a combination of curriculum, technology, instructional and support services inclusive of administrative support.

Three Months Ended

 

Change

 

Six Months Ended

 

Change

December 31,

 

2022 / 2021

 

December 31,

 

2022 / 2021

2022

 

2021

 

#

 

%

 

2022

 

2021

 

#

 

%

(In thousands, except percentages)
 
General Education (2)

111.2

145.6

(34.4

)

(23.6

%)

111.5

146.1

(34.6

)

(23.7

%)

Career Learning (2)(3)

66.3

41.9

24.4

 

58.2

%

65.1

41.9

23.2

 

55.4

%

Average Enrollment

177.5

187.5

(10.0

)

(5.3

%)

176.6

188.0

(11.4

)

(6.1

%)

(1)

Enrollments are presented as the average monthly enrollments during the second quarter fiscal year 2023. Total ending enrollments were 180.3 thousand and 187.6 thousand, as of December 31, 2022 and 2021, respectively. General Education enrollments were 112.8 thousand and 145.5 thousand and Career Learning enrollments were 67.5 thousand and 42.1 thousand as of December 31, 2022 and 2021, respectively.

(2)This data includes enrollments for which Stride receives no public funding or revenue.
(3)

No enrollments are included in Career Learning for Galvanize, Tech Elevator or MedCerts.

Revenue per Enrollment Data

The following table sets forth revenue per average enrollment data for students for the period indicated. If the mix of enrollments changes, our revenues will be impacted to the extent the average revenues per enrollments are significantly different.

Three Months Ended

 

Change

 

Six Months Ended

 

Change

December 31,

 

2022 / 2021

 

December 31,

 

2022 / 2021

2022

 

2021

 

$

 

%

 

2022

 

2021

 

$

 

%

 
General Education$

2,281

$

1,953

$

328

16.8

%

$

4,508

$

3,852

$

656

17.0

%

Career Learning

2,319

1,794

525

29.3

%

4,280

3,482

798

22.9

%

Cash Flow and Capital Allocation

As of December 31, 2022, the Company’s cash and cash equivalents totaled $318.3 million, compared with $389.4 million reported at June 30, 2022. The decrease is largely the result of normal seasonal trends.

Capital expenditures for three months ended December 31, 2022 were $16.9 million, compared to $14.2 million in the second quarter of fiscal year 2022, and were comprised of $1.9 million of property and equipment, $11.6 million of capitalized software development, and $3.4 million of capitalized curriculum development.

Fiscal Year 2023 Outlook

The Company is raising its revenue and adjusted operating forecast and narrowing its capital expenditures forecast for the full year fiscal 2023:

  • Revenue in the range of $1.775 billion to $1.815 billion.
  • Capital expenditures in the range of $70.0 million to $75.0 million. Note that capital expenditures include the purchase of property and equipment, and capitalized software, and curriculum development costs as defined on our Statement of Cash Flows.
  • Effective tax rate of 27% to 29%.
  • Adjusted operating income in the range of $180.0 million to $200.0 million. (1)

The Company is forecasting the following for the third quarter fiscal year 2023:

  • Revenue in the range of $445.0 million to $465.0 million.
  • Capital expenditures in the range of $16.0 million to $19.0 million. Note that capital expenditures include the purchase of property and equipment, and capitalized software and curriculum development costs as defined on our Statement of Cash Flows.
  • Adjusted operating income in the range of $70.0 million to $80.0 million. (1)

(1)

In addition to providing an outlook for revenue and capital expenditures, adjusted operating income is provided as a supplemental non-GAAP financial measure as management believes that it provides useful information to our investors. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is provided below. Please also see Special Note on Forward Looking Statements below.

Conference Call

The Company will discuss its second quarter fiscal year 2023 financial results during a conference call scheduled for Tuesday, January 24, 2023 at 5:00 p.m. eastern time (ET).

A live webcast of the call will be available at https://events.q4inc.com/attendee/833472576. To participate in the live call, investors and analysts should dial (888) 210-2831 (domestic) or 1 (289) 514-2968 (international) and provide the conference ID number 4812941. Please access the website at least 15 minutes prior to the start of the call.

A replay of the call will be posted at https://events.q4inc.com/attendee/833472576 as soon as it is available.

About Stride Inc.

At Stride, Inc. (NYSE: LRN), we are reimagining learning—where learning is lifelong, deeply personal, and prepares learners for tomorrow. The company has transformed millions of people’s teaching and learning experiences by providing innovative, high-quality, tech-enabled education solutions, curriculums, and programs directly to students, schools, the military, and enterprises in primary, secondary, and postsecondary settings. Stride is a premier provider of K–12 education for students, schools, and districts, including career learning services through middle and high school curriculums. For adult learners, Stride delivers professional skills training in healthcare and technology, as well as staffing and talent development for Fortune 500 companies. Stride has delivered millions of courses over the past decade and serves learners in all 50 states and more than 100 countries. More information can be found at stridelearning.com, K12.com, galvanize.com, techelevator.com, and medcerts.com.

Special Note on Forward-Looking Statements

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this press release are forward-looking statements. We have tried, whenever possible, to identify these forward-looking statements using words such as “anticipates,” “believes,” “estimates,” “continues,” “likely,” “may,” “opportunity,” “potential,” “projects,” “will,” “expects,” “plans,” “intends” and similar expressions to identify forward looking statements, whether in the negative or the affirmative. These statements reflect our current beliefs and are based upon information currently available to us. Accordingly, such forward-looking statements involve known and unknown risks, uncertainties and other factors which could cause our actual results, performance or achievements to differ materially from those expressed in, or implied by, such statements. These risks, uncertainties, factors and contingencies include, but are not limited to: reduction of per pupil funding amounts at the schools we serve; inability to achieve a sufficient level of new enrollments to sustain our business model; limitations of the enrollment data we present, which may not fully capture trends in the performance of our business; failure to enter into new school contracts or renew existing contracts, in part or in their entirety; failure of the schools we serve or us to comply with federal, state and local regulations, resulting in a loss of funding, an obligation to repay funds previously received, or contractual remedies; governmental investigations that could result in fines, penalties, settlements, or injunctive relief; declines or variations in academic performance outcomes of the students and schools we serve as curriculum standards, testing programs and state accountability metrics evolve; harm to our reputation resulting from poor performance or misconduct by operators or us in any school in our industry and/or in any school in which we operate; legal and regulatory challenges from opponents of virtual public education or for-profit education companies; changes in national and local economic and business conditions and other factors, such as natural disasters, pandemics and outbreaks of contagious diseases and other adverse public health developments, such as coronavirus disease 2019 (“COVID-19”); discrepancies in interpretation of legislation by regulatory agencies that may lead to payment or funding disputes; termination of our contracts, or a reduction in the scope of services, with schools; failure to develop the Career Learning business; entry of new competitors with superior technologies and lower prices; unsuccessful integration of mergers, acquisitions and joint ventures; failure to further develop, maintain and enhance our technology, products, services and brands; inadequate recruiting, training and retention of effective teachers and employees; infringement of our intellectual property; disruptions to our Internet-based learning and delivery systems, including, but not limited to, our data storage systems, resulting from cybersecurity attacks; misuse or unauthorized disclosure of student and personal data; and failure to prevent or mitigate a cybersecurity incident that affects our systems; and other risks and uncertainties associated with our business described in the Company’s filings with the Securities and Exchange Commission. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. All information in this presentation is as of today’s date, and the Company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.

Financial Statements

The financial statements set forth below are not the complete set of Stride, Inc.’s financial statements for the three and six months ended December 31, 2022 and are presented below without footnotes. Readers are encouraged to obtain and carefully review Stride Inc.’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2022, including all financial statements contained therein and the footnotes thereto, filed with the SEC, which may be retrieved from the SEC’s website at www.sec.gov or from Stride Inc.’s website at www.stridelearning.com.

STRIDE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

Three Months Ended

Six Months Ended

December 31,

December 31,

2022

 

2021

 

2022

 

2021

 

(In thousands except share and per share data)

Revenues$

458,435

 

$

409,507

 

$

883,585

 

$

809,733

 

Instructional costs and services

288,347

 

261,950

 

583,848

 

535,774

 

Gross margin

170,088

 

147,557

 

299,737

 

273,959

 

Selling, general, and administrative expenses

102,015

 

90,642

 

260,383

 

224,021

 

Income from operations

68,073

 

56,915

 

39,354

 

49,938

 

Interest expense, net

(2,082

)

(1,875

)

(4,128

)

(3,868

)

Other income, net

3,970

 

3,884

 

5,007

 

3,795

 

Income before income taxes and loss from equity method investments

69,961

 

58,924

 

40,233

 

49,865

 

Income tax expense

(18,860

)

(15,928

)

(11,353

)

(13,035

)

Loss from equity method investments

(396

)

(992

)

(847

)

(709

)

Net income attributable to common stockholders$

50,705

 

$

42,004

 

$

28,033

 

$

36,121

 

Net income attributable to common stockholders per share:
Basic$

1.20

 

$

1.01

 

$

0.66

 

$

0.88

 

Diluted$

1.19

 

$

1.00

 

$

0.66

 

$

0.85

 

Weighted average shares used in computing per share amounts:
Basic

42,259,061

 

41,525,736

 

42,167,844

 

41,042,401

 

Diluted

42,547,334

 

41,963,399

 

42,602,405

 

42,413,828

 

 

STRIDE, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

December 31,

 

June 30,

2022

 

 

2022

 

 

 

 

(audited)

(In thousands except share and per share data)

ASSETS
Current assets
Cash and cash equivalents$

318,279

 

$

389,398

 

Accounts receivable, net of allowance of $25,744 and $26,993

442,166

 

418,558

 

Inventories, net

23,960

 

36,003

 

Prepaid expenses

43,822

 

25,974

 

Other current assets

100,588

 

80,601

 

Total current assets

928,815

 

950,534

 

Operating lease right-of-use assets, net

75,823

 

85,457

 

Property and equipment, net

68,124

 

61,537

 

Capitalized software, net

76,192

 

71,800

 

Capitalized curriculum development costs, net

50,557

 

50,580

 

Intangible assets, net

83,410

 

88,669

 

Goodwill

246,676

 

241,022

 

Deposits and other assets

89,694

 

93,946

 

Total assets$

1,619,291

 

$

1,643,545

 

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable$

32,809

 

$

61,997

 

Accrued liabilities

40,909

 

63,200

 

Accrued compensation and benefits

34,083

 

73,027

 

Deferred revenue

83,799

 

53,630

 

Current portion of finance lease liability

44,377

 

37,389

 

Current portion of operating lease liability

13,281

 

12,830

 

Total current liabilities

249,258

 

302,073

 

Long-term finance lease liability

28,925

 

28,888

 

Long-term operating lease liability

65,827

 

75,127

 

Long-term debt

412,260

 

411,438

 

Deferred tax liability

10,752

 

3,205

 

Other long-term liabilities

10,370

 

10,233

 

Total liabilities

777,392

 

830,964

 

Commitments and contingencies
Stockholders’ equity
Preferred stock, par value $0.0001; 10,000,000 shares authorized; zero shares issued or outstanding

 

 

Common stock, par value $0.0001; 100,000,000 shares authorized; 48,431,576 and 48,112,664 shares issued; and 43,096,833 and 42,777,921 shares outstanding, respectively

4

 

4

 

Additional paid-in capital

688,695

 

687,454

 

Accumulated other comprehensive income (loss)

187

 

143

 

Retained earnings

255,495

 

227,462

 

Treasury stock of 5,334,743 shares at cost

(102,482

)

(102,482

)

Total stockholders’ equity

841,899

 

812,581

 

Total liabilities and stockholders' equity$

1,619,291

 

$

1,643,545

 

 

STRIDE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

Six Months Ended

December 31,

2022

 

2021

 

(In thousands)

Cash flows from operating activities
Net income$

28,033

 

$

36,121

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization expense

53,714

 

49,327

 

Stock-based compensation expense

10,451

 

8,888

 

Deferred income taxes

7,995

 

6,008

 

Provision for doubtful accounts

2,173

 

4,730

 

Amortization of fees on debt

822

 

809

 

Noncash operating lease expense

7,369

 

10,074

 

Other

(2,869

)

5,550

 

Changes in assets and liabilities:
Accounts receivable

(25,680

)

(65,606

)

Inventories, prepaid expenses, deposits and other current and long-term assets

(9,177

)

11,944

 

Accounts payable

(26,059

)

(26,810

)

Accrued liabilities

(10,681

)

(8,570

)

Accrued compensation and benefits

(38,806

)

(39,157

)

Operating lease liability

(5,966

)

(10,662

)

Deferred revenue and other liabilities

29,863

 

5,686

 

Net cash provided by (used in) operating activities

21,182

 

(11,668

)

Cash flows from investing activities
Purchase of property and equipment

(2,823

)

(2,705

)

Capitalized software development costs

(21,399

)

(19,330

)

Capitalized curriculum development costs

(9,527

)

(7,461

)

Sale of other investments

60

 

5,261

 

Acquisition of assets

(1,409

)

 

Other acquisitions, loans and investments, net of distributions

(767

)

(3,956

)

Proceeds from the maturity of marketable securities

36,729

 

7,248

 

Purchases of marketable securities

(55,879

)

(38,720

)

Net cash used in investing activities

(55,015

)

(59,663

)

Cash flows from financing activities
Repayments on finance lease obligations

(19,938

)

(14,744

)

Payments of contingent consideration

(7,024

)

 

Payments of deferred purchase consideration

 

(7,858

)

Proceeds from exercise of stock options

10

 

246

 

Repurchase of restricted stock for income tax withholding

(10,334

)

(35,404

)

Net cash used in financing activities

(37,286

)

(57,760

)

Net change in cash, cash equivalents and restricted cash

(71,119

)

(129,091

)

Cash, cash equivalents and restricted cash, beginning of period

389,398

 

386,582

 

Cash, cash equivalents and restricted cash, end of period$

318,279

 

$

257,491

 

 
Reconciliation of cash, cash equivalents and restricted cash to balance sheet as of December 31st:
Cash and cash equivalents$

318,279

 

$

256,986

 

Other current assets (restricted cash)

 

505

 

Total cash, cash equivalents and restricted cash$

318,279

 

$

257,491

 

 

Non-GAAP Financial Measures

To supplement our financial statements presented in accordance with GAAP, we have presented adjusted operating income (loss), EBITDA, and adjusted EBITDA, which are not presented in accordance with GAAP.

  • Adjusted operating income (loss) is defined as income (loss) from operations as adjusted for stock-based compensation and the amortization of intangible assets.
  • EBITDA is defined as income (loss) from operations as adjusted for depreciation and amortization.
  • Adjusted EBITDA is defined as income (loss) from operations as adjusted for stock-based compensation and depreciation and amortization.
  • Adjusted EBITDA and adjusted operating income (loss) exclude stock-based compensation, which consists of expenses for stock options, restricted stock, restricted stock units, and performance stock units.

Management believes that the presentation of these non-GAAP financial measures provides useful information to investors relating to our financial performance. Adjusted operating income (loss) and Adjusted EBITDA remove stock-based compensation, which is a non-cash charge that varies based on market volatility and the terms and conditions of the awards. EBITDA and Adjusted EBITDA remove depreciation and amortization, which can vary depending upon accounting methods and the book value of assets. EBITDA and Adjusted EBITDA provide a measure of corporate performance exclusive of capital structure and the method by which assets were acquired.

Our management uses these non-GAAP financial measures:

  • as additional measures of operating performance because they assist us in comparing our performance on a consistent basis; and
  • in presentations to the members of our Board of Directors to enable our Board to review the same measures used by management to compare our current operating results with corresponding prior periods.

Other companies may define these non-GAAP financial measures differently and, as a result, our use of these non-GAAP financial measures may not be directly comparable to similar non-GAAP financial measures used by other companies. Although we use these non-GAAP financial measures to assess the performance of our business, the use of non-GAAP financial measures is limited as they include and/or do not include certain items not included and/or included in the most directly comparable GAAP financial measure.

These non-GAAP financial measures should be considered in addition to, and not as a substitute for, revenues, income (loss) from operations, net income (loss) and net income (loss) per share or other related financial information prepared in accordance with GAAP. Adjusted EBITDA is not intended to be a measure of liquidity. You are cautioned not to place undue reliance on these non-GAAP financial measures.

A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is provided below.

Reconciliation of Income from Operations to Adjusted Operating Income, EBITDA and Adjusted EBITDA

Second Quarter Fiscal Year 2023

 

Three Months Ended

 

Six Months Ended

 

December 31,

 

December 31,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

(In thousands)
Income from operations

$

68,073

$

56,915

$

39,354

$

49,938

Stock-based compensation expense

 

4,941

 

602

 

10,451

 

8,888

Amortization of intangible assets

 

3,279

 

3,214

 

6,568

 

6,427

Adjusted operating income

 

76,293

 

60,731

 

56,373

 

65,253

Depreciation and other amortization

 

24,184

 

21,966

 

47,146

 

42,900

Adjusted EBITDA

$

100,477

$

82,697

$

103,519

$

108,153

 
EBITDA

$

95,536

$

82,095

$

93,068

$

99,265

 

Reconciliation of Income from Operations to Adjusted Operating Income (unaudited)

Fiscal Year 2023 Outlook

Three Months Ended

 

Year Ended

March 31, 2023

 

June 30, 2023

Low

 

High

 

Low

 

High

(In millions)
Income from operations

$

62.5

$

70.5

$

147.5

$

164.5

Stock-based compensation expense

 

4.5

 

5.5

 

20.0

 

22.0

Amortization of intangible assets

 

3.0

 

4.0

 

12.5

 

13.5

Adjusted operating income

$

70.0

$

80.0

$

180.0

$

200.0

 

Investor Contact
Timothy Casey
Vice President, Investor Relations
Stride, Inc.
tcasey@k12.com

Source: Stride, Inc.